Goldcorp to Buy Ontario Mining Company Probe for $440 Million

By Judy McKinnon 

Goldcorp Inc. said Monday it has agreed to buy junior mining company Probe Mines Ltd. in a friendly, all-stock deal valued at about 526 million Canadian dollars (US$440 million), expanding the Vancouver company's presence in one of its core districts in Northern Ontario.

"This transaction is consistent with Goldcorp's long-standing strategy of securing growth opportunities in and around our existing districts with a focus on low-cost, high-quality gold production," Chuck Jeannes, Goldcorp's chief executive, said in a statement.

Toronto-based Probe Mines' key asset is the Borden Gold project, a deposit minable through conventional underground methods and located west of Goldcorp's Porcupine mine in Timmins, Ontario.

In an interview last week, Goldcorp Chairman Ian Telfer said the company is constantly looking for mergers and acquisitions. Unlike many other industries, mining companies need to grow through acquisitions because their assets are constantly being depleted and gold mines in particular tend to have shorter lives than other types of mines. Companies the size of Goldcorp can't rely on exploration to replace all their assets; larger mining concerns have a patchy record with exploration.

Goldcorp is seen as being the most likely to buy assets among gold-mining majors, given a balance sheet that is comparatively debt free and a share price that has outperformed the sector. Mr. Telfer said last week the company would look for acquisitions outside North America, where 70% of its assets are. South Africa and Australia present opportunities, he said.

Goldcorp, which already owns a 9.3% stake in Probe Mines, said shareholders of the smaller company will receive 0.1755 of a Goldcorp share in the deal, valuing Probe's shares at C$5 each.

The deal represents a 49% premium to Probe's closing price on Friday and will result in Goldcorp issuing about 17 million shares.

Goldcorp said Probe shareholders will also receive a stake in a new exploration company that will hold its mineral properties in the Ring of Fire district in northern Ontario, plus C$15 million in cash and certain other assets currently owned by Probe. Goldcorp will own about 9.3% of the new company.

"In combination with the recently-announced sale of the Wharf mine, this strategic acquisition is the latest example of our commitment to upgrading the quality of Goldcorp's overall asset portfolio," Mr. Jeannes said.

Goldcorp agreed last week to sell the Wharf mine in South Dakota to Coeur Mining Inc. for $105 million. That news came alongside Goldcorp's warning it would take a fourth-quarter impairment charge of up to $2.7 billion on its Cerro Negro gold mine in Argentina due to challenging fiscal conditions in that country.

Alistair MacDonald contributed to this article.

Write to Judy McKinnon at [e-mail]

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